In notes first published by City A.M., it has been revealed that the Liberal Democrats are looking for those earning over £50,000 to pay more in tax.
The Liberal Democrat press team calls this "looking at how the richest … could make a further contribution".
In these difficult times, it is important that everyone makes their contribution. It is right that we ask the broadest shoulder to bear their fair share: it is unrealistic to cut more money from welfare spending without increasing taxes on Britain's richest.
Their preferred methods? Hiking rates on capital gains to equal income tax rates, and the introduction of a Mansion Tax on properties worth over £2m.
Mark Field MP in City A.M. on Liberal Democrat plans for capital gains rate increases:
Capital gains have hitherto been taxed at a different rate from income for good reason. They come from investments which inevitably involve risk. Reduce the incentives to make those investments and you will find there are some unwelcome knock-on effects.
First, strong and growing economies depend upon high levels of investment. Higher levels of CGT will only serve to reduce the pool of savings available for future capital investment.
Second, capital is highly mobile. For that reason economic competitors of the UK’s such as Australia, New Zealand, Switzerland and the Netherlands, have abolished CGT. They recognise that high capital gains tax rates discourage investment.
CGT also clogs up capital markets. Nobody is compelled to sell an asset so uncompetitive rates of CGT will simply encourage those who do not need to realise their gains to switch into other assets or securities.
Moreover, high rates of CGT reduce turnover and liquidity levels in the stock market. In turn the most successful growing companies will find it more difficult and expensive to raise capital.
And on a Mansion Tax and stamp duty hikes:
The increased costs for landlords will result in higher rents, making London less attractive to multinationals. Corporate headquarters have global choices – many can, and will, relocate. Corporate tenants, and privately-educated foreign students in central London, contribute a large amount to the £10bn spent on shopping, education, the night time economy and tourism in the heart of the capital. International investment also makes many developments viable. It can support cash flow, and underpin the provision of public amenities and affordable housing.
Taxing the “rich” may tick the populist box, but Cable’s glib comment that it is easier to tax property because it cannot be transported to Liechtenstein completely misses the point. The government should avoid the soft target, and put its energy into effective measures that have a greater capacity to contribute to our tax revenues.